These last weeks made massive headlines with the announcement that French hypermarket operator Carrefour eventually sold 80 percent of their China business to local player Suning.

Carrefour arrived in China in 1995 and as of this year operated more than 210 large format supermarkets mostly in first and second tier cities - somewhat successful with lots of ups and downs over the years. Lately the revenue had been falling significantly accompanied by losses of more than 200 Mio EURO. Considering the seismic shifts in China's grocery segment in the last three years, an exit sale was understandable.

But here is what was really interesting about this acquisition and we at ChinaBriefs wanted to bring to your attention: Suning buying Carrefour is really an example of the ongoing proxy fight between Alibaba and Tencent for dominance in the offline retail space. Suning is partially owned by Alibaba. And Yonghui Supermarkets, the other potential suitor in the Carrefour sale counts Tencent among its larger shareholders. The two internet giants have made it abundantly clear that it will be crucial for their survival to extend their online empires into the bricks and mortar world in an attempt to seek access to more traffic sources to fill their digital channels.

The battle for offline retail is in full swing. It's a sad ending for Carrefour. However, there maybe a final sweetener one day when they can sell the remaining 20 percent of their China business. It would not be the first time that a foreign company's share in a China business becomes its most valuable asset (remember Yahoo's stake in Alibaba?). For Suning and Alibaba, the acquisition is a smart move as they gain exquisite real estate, warehousing and logistics expertise for fresh groceries (especially cold-chain) and a database with 30 Mio loyal customers. Keep in mind, online customer acquisition cost is estimated to be around 100-200 RMB (12-24 Euro) per User in China now. This in itself could easily justify more than half the total purchase price of 700 Mio USD that Suning shelled out for Carrefour.

As we reported in our last issue, Germany's no-frills discount grocery chain ALDI made its debut in Shanghai a few weeks ago. What can be learned from ALDI: they tested the water by using a digital-market-entry-first strategy by opening a cross-border ecommerce store on TMall Global. This allowed them to develop a thorough understanding of what the Chinese consumer really wants. On the basis of big data they spent an adequate amount of time to finetune their offline sortiment to maximise their chances of long-term success.

Key Take-aways:

Alibaba and Tecent are fighting for dominance in offline retail, because they desperately need to tap into offline traffic resources to fuel needed growth for their online businesses - hence a bidding war for Carrefour's struggling China unit.